REC’s / Compliance
Please ask us about our renewable energy programs.
Renewable Energy Certificates (RECs), also known as Green tags, Renewable Energy Credits, or Tradable Renewable Certificates (TRCs), are tradable environmental commodities in the United States which represent proof that 1 megawatt-hour (MWh) of electricity was generated from an eligible renewable energy resource.
These certificates can be sold and traded and the owner of the REC can claim to have purchased renewable energy. While traditional carbon emissions trading programs promote low-carbon technologies by increasing the cost of emitting carbon, RECs can incentivize carbon-neutral renewable energy by providing a production subsidy to electricity generated from renewable sources. It is important to understand however, the energy associated with a REC is sold separately and is used by another party. So when you purchase a REC you get only a certificate.
In states which have a REC program, a green energy provider (such as a wind farm) is credited with one REC for every 1,000 kWh or 1 MWh of electricity it produces (for reference, an average residential customer consumes about 800 kWh in a month). A certifying agency gives each REC a unique identification number to make sure it doesn’t get double-counted. The green energy is then fed into the electrical grid (by mandate),and the accompanying REC can then be sold on the open market.
Compliance
Compliance markets are created by a policy that exists in 25 U.S. states called Renewable Portfolio Standard. In these states, the electric companies are required to supply a certain percent of their electricity from renewable generators by a specified year. For example, in California the law is 20% renewable by 2010, whereas New York has a 24% requirement by 2013. There is a full listing of state renewable portfolio standards [1]. Electric utilities in these states demonstrate compliance with their requirements by purchasing RECs – in the California example, the electric companies would need to hold RECs equivalent to 20% of their electricity sales.
Source: Database of State Incentives for Renewables and Efficiency.